Anxious Chinese Investors Cut Equities Risk Ahead Of Holiday

SHANGHAI (Reuters) – Unnerved by a slump in their stock market in the past two weeks, Chinese investors are playing it safe as they head into week-long Lunar New Year holidays by reducing their equity holdings.

China’s stock market will be closed from Thursday through next Wednesday for the holiday. In preparation, money is flowing into less risky assets, such as bonds, while traders are also scooping up derivatives to hedge against market risks.

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“Given current global market conditions, holding stocks throughout the holiday would be really disturbing. So why don’t you enjoy the holiday trouble-free?” said Wen Xunneng, a Shanghai-based investor.

Wen said he took advantage of this week’s market rebound to empty his stock account and put cash into safer assets such as fixed income and banks’ wealth management products.

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Chinese stock markets were among the worst hit in the broad selloff in global stock markets this month, triggered by worries about interest rate hikes in developed economies and rising bond yields. The main Shanghai stock index lost 11 percent of its value over two weeks.

Even within fixed income markets, investors appeared to be looking for safer ways to ride out the holiday by seeking shorter-tenor, high-rated bonds and eschewing leverage.

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Yun Xiong, a partner at Leiton Capital in Shanghai, said he has taken a defensive stance with about one-third of his fixed-income position, moving into short-duration Chinese government bonds.

“We don’t like uncertainty,” he said.

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Wu Jie, a Shanghai-based hedge fund manager, cut his stock holdings down to a third to avoid being caught out by any negative developments in global markets while China is on holiday.

The market rout has challenged the conviction many Chinese investors held in buying and holding blue-chip stocks. That strategy had paid off in 2017 as index heavyweights rallied, driven in part...